William Hill might be fancied after referendum

William Hill shares have tanked, during the biggest political betting event in British history.

For the last few months, William Hill has barely been out of the news, mostly for the right reasons.

The bookmaker, just like rivals Ladbrokes and Paddy Power Betfair, has enjoyed reams of free airtime, impressions and column inches, as it calls the odds ahead of the Brexit vote.

Ironically though, during this ‘once-in a-lifetime’ event, the 82-year old group is one of the worst FTSE 350 performers, down 26% this year.

The stock’s poor run can only partly be explained by the sell-off across assets on concerns about the economic impact of a Brexit, particularly on consumption and the pound.

On that basis, William Hill shares would fall further and faster than the market in the event of a Brexit, as that would compound its unfavourable industry position.

The group was Britain’s highest-grossing bookie in 2015 and around 85% of its £1.6bn sales were in sterling.

The chill even reached the capital markets this week, when the group had to make last-minute revisions to a bond deal following poor demand.

Shareholders have also been less than enthusiastic, as the referendum offers another chance to trim losers, in an industry roiled by consolidation, the Internet and regulation.

William Hill hasn’t participated in the latest wave of UK deals, and that’s another reason why the stock has been the clear loser among listed bookies over a year.

At the same time, the creation of another large, well-integrated competitor is still on. The Competition and Markets Authority last week obliged Ladbrokes and Gala Coral to sell 350-400 shops to win merger clearance. They signalled they would.

On the plus side, William Hill shares—40% lower in 2 years—certainly can’t be described as expensive, even in a sector de-rated by the worst Cheltenham Festival in living memory (for bookies).

The group also retains a bigger wad of free cash than rivals, partly due to reasons mentioned above, and its leverage is modest.

That modesty might prove attractive to a buyer, when the referendum dust settles.